Notes to Consolidated Financial Statements

NOTE 3

DISCONTINUED OPERATIONS, EXTRAORDINARY ITEM AND OTHER DISPOSITIONS

Discontinued Operations

Telecomunicaciones de Puerto Rico, Inc.

On March 30, 2007, we completed the sale of our 52% interest in
Telecomunicaciones de Puerto Rico, Inc. (TELPRI) and received gross
proceeds of approximately $980 million. The sale resulted in a pretax
gain of $120 million ($70 million after-tax). Verizon contributed $100
million ($65 million after-tax) of the proceeds to the Verizon
Foundation.

Verizon Dominicana C. por A.

On December 1, 2006, we closed the sale of Verizon Dominicana C. por
A (Verizon Dominicana). The transaction resulted in net pretax cash
proceeds of $2,042 million, net of a purchase price adjustment of $373
million. The U.S. taxes that became payable and were recognized at the
time the transaction closed exceeded the $30 million pretax gain on the
sale resulting in an overall after-tax loss of $541 million.

Verizon Information Services

In October 2006, we announced our intention to spin-off our domestic
print and Internet yellow pages directories publishing operations, which
have been organized into a newly formed company known as Idearc Inc. On
October 18, 2006, the Verizon Board of Directors declared a dividend
consisting of 1 share of the newly formed company for each 20 shares of
Verizon owned. In making its determination to effect the spin-off,
Verizon's Board of Directors considered, among other things, that
the spin-off may allow each company to separately focus on its core
business, which may facilitate the potential expansion and growth of
Verizon and the newly formed company, and allow each company to
determine its own capital structure.

On November 17, 2006, we completed the spin-off of our domestic print
and Internet yellow pages directories business. Cash was paid for
fractional shares. The distribution of common stock of the newly formed
company to our shareowners was considered a tax free transaction for us
and for our shareowners, except for the cash payments for fractional
shares which were generally taxable.

At the time of the spin-off, the exercise price and number of shares
of Verizon common stock underlying options to purchase shares of Verizon
common stock, restricted stock units (RSU's) and performance stock
units (PSU's) were adjusted pursuant to the terms of the applicable
Verizon equity incentive plans, taking into account the change in the
value of Verizon common stock as a result of the spin-off.

In connection with the spin-off, Verizon received approximately $2
billion in cash from the proceeds of loans under a term loan facility of
the newly formed company and transferred to the newly formed company
debt obligations in the aggregate principal amount of approximately $7.1
billion thereby reducing Verizon's outstanding debt at that time. We
incurred pretax charges of approximately $117 million ($101 million
after-tax), including debt retirement costs, costs associated with
accumulated vested benefits of employees of the newly formed company,
investment banking fees and other transaction costs related to the
spin-off, which are included in discontinued operations.

In accordance with SFAS No. 144 we have classified TELPRI, Verizon
Dominicana and our former domestic print and Internet yellow page
directories publishing operations as discontinued operations in the
consolidated financial statements for all periods presented through the
date of the divestiture or spin-off.

Income from discontinued operations, net of tax, presented in the
consolidated statements of income included the following:

(dollars in millions)

Years Ended December 31,

2008

2007

2006

Operating revenues

$

–

$

306

$

5,077

Income before provision for income taxes

$

–

$

185

$

2,041

Provision for income taxes

–

(43

)

(1,282

)

Income from discontinued operations, net of tax

$

–

$

142

$

759

Extraordinary Item

Compañía Anónima Nacional Teléfonos de Venezuela (CANTV)

In January 2007, the Bolivarian Republic of Venezuela (the Republic)
declared its intent to nationalize certain companies, including CANTV.
On February 12, 2007, we entered into a Memorandum of Understanding
(MOU) with the Republic, which provided that the Republic offer to
purchase all of the equity securities of CANTV, including our 28.5%
interest, through public tender offers in Venezuela and the United
States. Under the terms of the MOU, the prices in the tender offers
would be adjusted downward to reflect any dividends declared and paid
subsequent to February 12, 2007. During 2007, the tender offers were
completed and Verizon received an aggregate amount of approximately $572
million, which included $476 million from the tender offers as well as
$96 million of dividends declared and paid subsequent to the MOU. During
2007, based upon our investment balance in CANTV, we recorded an
extraordinary loss of $131 million, including taxes of $38 million.

Other Dispositions

Telephone Access Lines Spin-off

On January 16, 2007, we announced a definitive agreement with
FairPoint Communications, Inc. (FairPoint) providing for Verizon to
establish a separate entity for its local exchange and related business
assets in Maine, New Hampshire and Vermont, spin-off that new entity
into a newly formed company, known as Northern New England Spinco Inc.
(Spinco), to Verizon's shareowners, and immediately merge it with
and into FairPoint.

On March 31, 2008, we completed the spin-off of the shares of Spinco
to Verizon shareowners and the merger of Spinco with FairPoint,
resulting in Verizon shareowners collectively owning approximately 60
percent of FairPoint common stock. FairPoint issued approximately 53.8
million shares of FairPoint common stock to Verizon shareowners in the
merger, and Verizon shareowners received one share of FairPoint common
stock for every 53.0245 shares of Verizon common stock they owned as of
March 7, 2008. FairPoint paid cash in lieu of any fraction of a share of
FairPoint common stock.

On April 1, 2008, the number of shares of restricted stock units
(RSUs) and performance stock units (PSUs) previously issued by Verizon
were adjusted pursuant to the terms of the applicable Verizon equity
incentive plans, taking into account the change in the value of Verizon
common stock as a result of the spin-off.

We also entered into other agreements that defined responsibility for
obligations arising before or that may arise after the spin-off,
including, among others, obligations relating to Verizon employees whose
primary duties relate to Spinco's business, certain transition
services and taxes. In general, the agreements governed the exchange of
services between us and FairPoint through January 2009 at specified
cost-based or commercial rates.

As a result of the spin-off, our net debt was reduced by
approximately $1.4 billion. The consolidated income statements for the
periods presented include the results of operations of the local
exchange and related business assets in Maine, New Hampshire and Vermont
through March 31, 2008, the date of completion of the spin-off. The
consolidated balance sheet as of December 31, 2008 reflects the spin-off
as of March 31, 2008, which increased shareowners' investment by
approximately $16 million, and included approximately $79 million ($44
million after-tax) related to defined benefit pension and postretirement
benefit plans, which is reflected as a reduction to the beginning
balance of Accumulated other comprehensive loss.

During 2008, we recorded pretax charges of $103 million ($81 million
after-tax) for costs incurred related to the separation of the wireline
facilities and operations in Maine, New Hampshire and Vermont from
Verizon at the closing of the transaction, as well as for professional
advisory and legal fees in connection with this transaction. During
2007, we recorded pretax charges of $84 million ($80 million after-tax)
for costs incurred related to the separation of the wireline facilities
and operations in Maine, New Hampshire and Vermont.

* This is an interactive electronic version of Verizon’s 2008 Annual Report to Shareowners, and it is intended to be complete and accurate.
The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is
available in PDF format on this website.